Institutional Investors Weigh Workforce Housing Risks Amid Immigration Trends Article originally posted on Globe St. on August 20, 2025 The U.S. rental market is navigating an uneven recovery as developers, investors and operators weigh the impacts of past oversupply against the forces of labor, affordability and demographics. A factor increasingly shaping that balance—though often indirectly—is immigration. Recent arrivals are affecting the construction pipeline and rental demand differently across market-rate and higher-end institutional products, forcing investors to take a closer look at portfolio positioning. At a recent rental market summit hosted by John Burns Research and Consulting, industry leaders described cautious optimism in the sector. Chris Nebenzahl, vice president of rental research at the firm, said the slowdown of the past two years was largely tied to “just how much supply we’ve added to the market, both BTR and multifamily.” He noted that, after a historic construction surge, new starts have slowed significantly since 2023, while absorption has “picked up at a very strong clip,” fueled by affordability pressures in the for-sale housing market. While the discussion focused on supply and demand dynamics, the underlying role of construction labor emerged as a continuing pressure point. Immigration—particularly among newly arrived workers—has historically supported construction labor capacity, especially in high-growth markets across the Sun Belt. The pandemic period disrupted many of those migration patterns, contributing to delays and elevated costs that hit mid-market and workforce housing developers particularly hard. Institutional-grade projects, typically financed by larger equity groups with access to deeper capital reserves, have been better able to withstand labor market volatility and cost inflation. Workforce-oriented developers, by contrast, often operate on tighter margins and rely more directly on the availability of affordable labor. Without sufficient immigrant labor force participation, their delivery timelines and cost structures remain more exposed. On the demand side, immigration’s impact diverges as well. Many recent arrivals enter the workforce at moderate income levels, often gravitating first to more affordable rental options. This creates steady demand at the workforce and middle-market end of the spectrum, even as luxury and institutional assets compete for a smaller pool of higher-income tenants. Nebenzahl pointed out that retention among existing renters, supported by affordability barriers to ownership, is particularly strong: “We’ve seen retention reach record highs from the REITs. We’ve seen that in our own data as well.” For institutional investors, that split has significant portfolio implications. Higher-end assets carry exposure to lease-up risk in slowing Sun Belt submarkets that saw a large influx of new product during the construction boom. At the same time, workforce-anchored properties are likely to experience more stable occupancy but ongoing margin pressure from construction labor volatility and regulatory constraints on rent growth. Vice President Zach Nyberg, who leads rental consulting work out of John Burns’ Florida office, underscored how nuanced the picture is across geographies. “A lot of the work that we’re doing with the developers is trying to tell that story on a market by market, sub market by sub market basis, to really understand how these things are going to play out over the next two to three years,” he said. For investors, the intersection of these forces creates both risk and strategic opportunity. Markets still absorbing a glut of Class A supply may require patience, while segments exposed to immigrant-driven workforce demand could benefit from stable occupancy trends—even as developers weigh cost pressures tied to labor shortages. As the country faces ongoing debates over immigration policy, the rental housing sector shows how decisions made in Washington reverberate down to construction sites, leasing offices and ultimately portfolio allocations.